Malaysia’s new government on Wednesday said it would reduce a goods and services tax to zero from June 1, effectively abolishing it, a move that is likely to spur spending in the Southeast Asian nation but put pressure on its fiscal position.

Prime Minister Mahathir Mohamad, who won last week’s general election, had vowed during the campaign to get rid of the 6 per cent GST to address the rising cost of living. Ousted leader Najib Razak had introduced the tax in 2015 amid lower oil prices.

GST would be zero-rated from June 1, the Ministry of Finance said in a statement on Wednesday.

Mahathir had also promised to reintroduce fuel subsidies, which along with the GST removal, could widen Malaysia’s fiscal deficit.